Advice Needed : Letting Agency T&Cs relating to sale of property to tenants

ethanol_2

Hi everyone, I'm looking for some advice and maybe even to help someone else avoid getting into a similar position!

Background :
- Myself and my wife decided to quit jobs (Dec 05) and travel around the world for 1 year (Jan 06-Jan 07) - (we had an excellent time!!)
- We decided to rent out our house and instructed a letting agent in November 05 to find us tenants (furnished property)
- The letting agent was instructed to only find us the tenants. We have friends nearby who looked after the property for us and dealt with the tenants (rent, repairs,...)
- The agent found us tenants and they began a 6 month AST on 10th April 2006. They signed a contract which the letting agency signed on behalf of us.
- They decided to remain for another 6 months and signed another AST with our friends (again signing on behalf of us)
- Whilst travelling, we decided that we are interested in moving to Australia and are approaching the end of our residency application.
- We are now looking to sell our property and amazingly for us, the tenants are interested in buying it (we have come to an appropriate price which we both feel is fair reflecting the fact that there will be no need for estate agents).

Now the problem. When we left, we had no intention of selling our property upon our return, so were not concerned with contract terms related to sale!

- The contract we signed with the lettings agency has the following clause
6. General Terms and Conditions
6.14 Purchase of the Property by any party
In the event that the Tenant, or anyone associated with the Tenant, or anyone introduced by the agent to the Property, purchases the property during or within the 6 months of the end of the Tenancy, the Landlord agrees to pay comission to the agent at a rate of 1.5% of the contract price. At the Agents discretion this may be reduced by negotiation according to the length of any landlord/agent relationshiop. The comission plus VAT is payable upon completion of the sale.

- The original AST ran from April 11th 2005 - October 10th 2005
- The second AST runs from October 11th 2006 - April 11th 2007

Question : Are we liable to pay 1.5% comission to the agent upon sale of the property if we exchange and complete after April 11th 2007? Its galling to think that the agent (who we paid for finding us the tenants in the first place) could stand to receive thousands of pounds for no additional work!

We have received advice from 2 different solicitors which is conflicting
- One suggests that we would be liable as the tenancy is continuing
- One suggests that we would not be liable as a second AST agreement was signed and we would be performing the sale more than 6 months later than the end of the first AST

Any help or advice would be greatly appreciated. Also, if anyone else is about to instruct an agent to find tenants for a property, you may want to check the T&Cs for something like this if there is ANY chance you may want to sell the property at a later date to the tenants.

ethanol_2

Don't know if this helps :

Housing Act 1988
1988 c.50 - continued
Part I - Rented Accommodation - continued
Housing act 1988

Chapter II
Assured Shorthold Tenancies

Assured shorthold tenancies.

20.—(1) Subject to subsection (3) below, an assured shorthold tenancy is an assured tenancy—
(a) which is a fixed term tenancy granted for a term certain of not less than six months; and
(b) in respect of which there is no power for the landlord to determine the tenancy at any time earlier than six months from the beginning of the tenancy; and
(c) in respect of which a notice is served as mentioned in subsection (2) below.
(2) The notice referred to in subsection (1)(c) above is one which—
(a) is in such form as may be prescribed;
(b) is served before the assured tenancy is entered into;
(c) is served by the person who is to be the landlord under the assured tenancy on the person who is to be the tenant under that tenancy; and
(d) states that the assured tenancy to which it relates is to be a shorthold tenancy.
(3) Notwithstanding anything in subsection (1) above, where—
(a) immediately before a tenancy (in this subsection referred to as "the new tenancy") is granted, the person to whom it is granted or, as the case may be, at least one of the persons to whom it is granted was a tenant under an assured tenancy which was not a shorthold tenancy, and
(b) the new tenancy is granted by the person who, immediately before the beginning of the tenancy, was the landlord under the assured tenancy referred to in paragraph (a) above,
the new tenancy cannot be an assured shorthold tenancy.
(4) Subject to subsection (5) below, if, on the coming to an end of an assured shorthold tenancy (including a tenancy which was an assured shorthold but ceased to be assured before it came to an end), a new tenancy of the same or substantially the same premises comes into being under which the landlord and the tenant are the same as at the coming to an end of the earlier tenancy, then, if and so long as the new tenancy is an assured tenancy, it shall be an assured shorthold tenancy, whether or not it fulfils the conditions in paragraphs (a) to (c) of subsection (1) above. (5) Subsection (4) above does not apply if, before the new tenancy is entered into (or, in the case of a statutory periodic tenancy, takes effect in possession), the landlord serves notice on the tenant that the new tenancy is not to be a shorthold tenancy.
(6) In the case of joint landlords—
(a) the reference in subsection (2)(c) above to the person who is to be the landlord is a reference to at least one of the persons who are to be joint landlords; and
(b) the reference in subsection (5) above to the landlord is a reference to at least one of the joint landlords.
(7) Section 14 above shall apply in relation to an assured shorthold tenancy as if in subsection (1) of that section the reference to an assured tenancy were a reference to an assured shorthold tenancy.

See subsection (4) which reads as though each AST is separate - coming to an end of an AST and a "new tenancy" therefore it does not seem AST s which are entered into again on the same terns would be deemed to be continuing.

Am I interpreting this correctly?

ethanol_2

Anyone out there with any experience of this?

ethanol_2

If no-one here can help, any ideas who can?

dnwilliams

I’m fairly certain that the agents agreement would be uninforcible under the 'Unfair Terms in Consumer Contract Regulations'. Basically any agency agreement relating to lettings should not contain clauses relating to sales. They should issue you with a new ‘residential sales agency agreement'. When they do you can then negotiate a more realistic fee.

ethanol_2

Hi there, thanks for the reply.

dnwilliams wrote:

They should issue you with a new ‘residential sales agency agreement'. When they do you can then negotiate a more realistic fee.

Why would they issue a new agreement though and why would I want one? If the previous one would not stand and we went ahead and sold the property to our tenants ourselves, then we would still not want them to be involved.

dnwilliams

As far as i'm aware if you dont sign an agency agreement specifically relating to the sale of your property then there case for a sales fee would be extremely weak.

prudryden

This is a very interesting question. May I suggest that you register for the LANDLORDZONE FORUM. There are people on that site whose profession is to know the answers to this type question. A case to challenge the unfairness of the contract would not be one for the local county court. Does anyone have knowledge of any case history?

www.landlordzone.co.uk